Many times, startup founders have this plan:
- Come up with a winning idea
- Figure out how many people you'll need to hire to make the idea come to life
- Figure out how many server and other datacenter resources you'll need to support millions of users
- Hire or contract enough to get a prototype
- Get VC or Angel funding (if you're lucky)
- Find office space, hire employees, get it all set up and built
- Do a private beta
- Launch it to everyone
- Make money to pay back the investors
- Go IPO
- Sell your company
This is a great model if you're building the next Google, or Facebook, or Twitter. If you're expecting 95% of the US to use your service, the above model is the way to go. But it's a horrible idea for many other much smaller markets.
With cheap and free resources available today, you can start a company with minimal personal investment and be profitable very quickly. Sometimes just by yourself, and sometimes with the help of others. It depends on the skills you have in programming, server administration, marketing, business sense, etc.
Here's the Startup Next Door method:
- Come up with a winning idea that appeals to a niche
- Build just what you need to start with, with only minimal resources
- Launch it, and if needed, lock down registrations to throttle usage
- As your business starts making money, use that money to fund more resources
- Get feedback and make improvements
- Be thinking of the next winning idea
The key to this idea is making the business fund itself. If you start it with no idea how your idea is going to make money, you're going to have to fund the business and its scaling from your own pocket.
This bootstrapping practice leads you to smarter spending decisions as 37signals' Jason Fried (@jasonfried) describes in the first few minutes of this video:
The money you make from a startup is a significant factor in how much time you put into it. If your startup isn't making money or doesn't have any prospect for making money, why are you going to sacrifice your time to build it or improve it? Your time is valuable. I sacrifice time away from family to build my startups. I do it so that in the future my family will have nice vacations, good medical care, good food, travel, a safe place to live, early retirement, and as few monetary worries as possible. What you do with the money from your startups is your choice.
Some people will build a startup out of ego, or to create a service that makes the world a better place, and they're happy even if it doesn't make money or has no business model. If that's you, you'll find plenty of advice here to help you get it done as inexpensively as possible, but your day job is going to fund it completely.
What are your thoughts?
Next post: choosing how you are going to do business